Housing Market Boomed Under Blair

19 June 2007: Lee Grandin, Managing Director, Landlord Mortgages comments on the property market under Tony Blair, and predicts the future under the new regime: “Under Blair’s ten year leadership the property market has boomed, with a 179% increase in house prices. This has been fantastic for both homeowners and property investors alike. With rising interest rates, this rate of growth cannot be sustained. Property has grown at more than three times the rate of income. Household income has grown 52%* since Blair first came into power in 1997, and for the sake of affordability, the housing market must cool, with growth a predicted 24% over the next five years.”

*ONS, 2006

CML: Buy-to-let is strong sector.

The buy-to-let sector is "strong" and could stay that way for a while, the trade association for the mortgage lending industry has said.

Bernard Clarke, spokesperson for the Council of Mortgage Lenders (CML), remarked that it is difficult to make forecasts about the buy-to-let market.

He explained that the recent base rate rise by the Bank of England's monetary policy committee has caused borrowers "to continue to look hard at the balance between rent and borrowing costs".

Rising interest rates could "potentially" cause a slow down in lending within the buy-to-let sector, he suggested.

However, Mr Clarke said that a number of other factors contribute to buy-to-let remaining a strong market.

"We continue to see it as a strong sector driven by very strong fundamentals in terms of shortage of housing supply, immigration and a growth in housing demand and the problem of accessing home ownership for numbers of people who therefore have to rent," he remarked.

The CML's members account for approximately 98 per cent of UK residential mortgage lending.

Recently, it announced that it was the first financial services trade body to sign the Trade Association Forum's climate change declaration.

New builds 'a good buy-to-let investment option'

New builds are a good option for buy-to-let investors, a spokesperson from the Home Builders Federation (HBF) has said.

John Slaughter, director of external affairs for the HBF, remarked that new builds can be just as suitable for renters as period properties because different people are looking for different things.

"There's quite a good part of the market that prefers new builds," he commented.

"[New builds have] other advantages in terms of it not needing a lot of maintenance [and] being built to modern building performance standards."

Energy efficiency is also likely to be much better in a new property than in an old one, he added.

Additionally, Mr Slaughter cited research from the HBF that said approximately one-quarter of first-time buyers preferred a new building.

Because they need less renovation and redesign work, homebuyers see new builds as being hassle-free, he explained, adding: "You can buy already refurbished period properties but they tend to be quite expensive because they have been done up."

The HBF is the trade organisation for private sector housebuilders in England and Wales. Some 80 per cent of new homes built in these areas are completed by its member companies.

Buy-to-let investors 'continue to have a healthy market'

Despite worries about a slowing market, buy-to-let investors should still be able to enjoy returns from a healthy market, according to a financial services director.

Martin Smith of Clyde Property told the Sunday Herald that landlords are likely to continue to have steady occupancy and demand.

"The buy-to-let market has grown incredibly over the last ten years with a period of sustained increases in house prices and the emergence of innovative buy-to-let mortgages," he told the publication.

"Our experience is that tenancy and occupancy rates remain high with virtually no void periods for most properties in good locations."

Part of the reason that the buy-to-let market should not be worried about a slowing market has to do with the focus on long-term capital growth, he explained, as well as the ability to gear investment.

Compared to investing on the stock market - where growth is based on initial investment - a property investor "can borrow another £150,000 and buy a property at £200,000 which is currently increasing in value by around £20,000 per annum", said Mr Smith.

In related news, the Home Builders Federation recently stated that new builds are a good buy-to-let investment choice.